For Employers Seeking to Rein in Health Costs, It's All About the Drugs

More employers are requiring prior authorization and the use of select specialty pharmacies for high-cost drugs.

Once up on a time large employers looked first at how to hold the line on spending in the company’s plan that covered hospital and physician care. The prescription plan was an afterthought.

That’s not true anymore, according to a survey of large employers conducted from mid-May through the end of June and released yesterday by the National Business Group on Health.

According to the findings, 55% of employers next year plan to direct their employees to selected specialty pharmacies for certain drugs that can cost thousands of dollars for a single treatment. In 2015, only one-third of the employers opted for this route.

Also, more companies will require prior authorization for specialty drugs. That share is now 53%, up from 29% a year ago. Other steps employers take include approving a limited drug supply (35%, up from 29% in 2015), and localized drug administration management (32%, up from 18% in 2015).

What’s driving this trend? One factor is the anticipated 2018 federal excise tax on high-cost health plans. Due to the Affordable Care Act (ACA), employers could face a 40% tax on those amounts that go above preset government benchmarks. Revenues from this tax will help pay for the cost of providing coverage to uninsured Americans.

Another cost-driver employers cite is high-cost claimants, which were identified by 41% of respondents as a problem.

Large employers continue to look for ways to save money, including private exchanges. By 2016, 3% of the respondents will have moved their employees to such an exchange, and 24% were considering such a move. Fewer employers are looking at this option for active employees, but more are considering it for their retirees.

One trend that has slowed from prior years is cost-shifting to employees—employers said overall they were not asking for higher premium contributions and deductibles. However, more are adding surcharges for spouses who have the option of obtaining coverage through their own employer, and a handful will exclude spouses completely if they can get coverage elsewhere.

Another trend is a jump in the availability of telehealth. Nearly 3 in 4 (74%) of respondents said will offer this option in states where it is legal, a large increase from 2015 (48%).